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Executive summary
As of September 2024, the outcome of the US presidential election is still wide open. The Democratic Party’s nomination of Vice President Kamala Harris as candidate has reinvigorated the contest. But Harris and former President Donald Trump are still largely tied in the polls nationally and in key swing states. Both candidates have a realistic path to the presidency.
Republicans maintain a small edge in the Congressional elections for both chambers and are expected to hold the House by a narrow margin. However, Harris’ entry and a growing trend toward split-ticket voting could bolster Democratic contenders’ chances and bring surprises in close races.
Irrespective of the election outcome, the next US administration will be more domestic in focus, prioritize revitalizing US manufacturing, continue to reduce reliance on China, and will not be sympathetic to free trade.
A second Trump term would resume policies from his first term: lower taxes, fewer regulations, a focus on US manufacturing, a rollback of climate policies, more support for US oil and gas extraction, and a more transactional and mercantilist approach to trade, including with allies. Under an “opportunity economy” theme, Harris’ economic proposals are also focused on the domestic front and domestic manufacturing, but prioritize the green transition and infrastructure investment, with the defining goal of building up the middle class and using public intervention where markets fail.
A second Trump administration is likely to escalate its first-term economic and trade policies which would have a serious impact on Europe. Trade tensions, including a 10-20% tariff on imports could lead to a complex dynamic where US tariffs undercut European domestic growth while strengthening the US dollar, and therefore making European exports more competitive.
A Harris administration would increase corporate taxes and income taxes for the wealthy. Trump has pushed to lower the corporate tax rate by one percentage point and campaigned on making the tax cuts from his first term – the largest revision of the tax code in 30 years – permanent.
A Harris administration would continue with the existing spending plans from Biden which has pumped trillions of dollars into the economy within the next decade. Trump’s campaign promises to reduce significant subsidies in green transition policies and technologies would hit European and German US affiliates profiting from current programs.
Despite political and societal divisions, the United States will remain an attractive investment destination. An erosion of democratic norms is unlikely to impact the investment conditions in the near term. Trump is keenly attuned to the US economy’s performance and may eventually be deterred from undemocratic policies that would have a negative impact on the business environment.
Still, concerns remain over the rule of law and democracy under a Trump presidency. However, many of his policies are generally supported by the US business community, if nothing else despite not because of him.
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